Customs, Excise and Gold Tribunal - Tamil Nadu
Swathy Cable And Conductors (P) Ltd. vs Commr. Of C. Ex. on 23 July, 1997
Equivalent citations: 1998(100)ELT94(TRI-CHENNAI)
ORDER
V.P. Gulati, Vice President
1. The issue in the appeal relates to the abatement of sales tax which was realised by the appellants from the customers and remitted to the State Government and which was credited to "Tax for Growth Fund" under a scheme formulated under the G.O. (P) No. 68/90/TD, dated 31-3-1990 as notified in the gazette notification dated 1-11-1991 by the Government of Kerala.
2. The learned lower authority has held that this amount of the sales tax which under this scheme as above since it was ultimately credited to the appellants account by way of relief provided by the State Government, would not be abateable as the appellants are the beneficiary of this amount. The learned lower authority in this regard has held as under :-
"Coming to the merit of the case, the party has pleaded that they were not the beneficiaries of the scheme and according to them, the scheme was announced by the Kerala Government as an incentive to Small Scale Industries. I agree that the State Government can notify schemes for encouraging Small Scale Industries. However, the question is whether such scheme had an impact on the assessable value of the goods cleared by such units. In the present case, M/s. Swathy Cables and Conductors Pvt. Ltd. were permitted to collect the sales tax from their buyers. The amount so collected was paid back by the Government to the District Manager of Kerala Financial Corporation towards discharging the loans taken by M/s. Swathy Cables and Conductors Pvt. Ltd. From this, it is obvious that although they collected an amount equivalent to sales tax from their buyers, M/s. Swathy Cables & Conductors Pvt. Ltd. were the beneficiaries of this amount and not the Kerala Government. Therefore, the price of the cables or conductors sold by them was, in fact, inclusive of the amount of so-called sales tax. Secondly, if Kerala Government had not returned the amount equivalent to the sales tax collected, M/s. Swathy Cables and Conductors Pvt. Ltd., would have adjusted their price in such a way as to realise sufficient amount to discharge their loan to Kerala Financial Corporation. In other words, they would have collected a higher price from their buyers. Since the amount of sales tax flowed back to them, they could avoid this eventuality. In view of this, I have no doubt in my mind that the amount collected by M/s. Swathy Cables & Conductors (P) Ltd. cannot be treated as sales tax for the purpose of Section 4(4)(d)(ii) of the Central Excise Act, as they were the beneficiaries of this amount and not the Kerala Government."
3. The learned Consultant for the appellants has stated that the scheme as above was formulated to provide subsidy for certain categories of SSI units which are specified in the Government Order and the appellants unit qualified for the same.
4. He has pleaded that the appellants opted for the benefit of the scheme and therefore when they filed the price list showing the ex-works price. The sales tax which was payable in respect of the goods, was separately shown in the invoices and collected from the customers. He has pleaded that the price list of the appellant were approved from time to time. Their RT 12 returns were also assessed and they filed all the documents viz. gate passes, invoices etc. He has pleaded the appellant paid the duty based on the ex-works price and no objection was taken by the authorities at the time of finalisation of RT 12 return. Subsequently, however, the authorities felt that the sales tax collected ultimately had enured to the benefit of the appellant when this amount after collection and remittance to the State Government was credited to the "Tax for Growth Fund" and the amount of the sales tax ultimately was adjusted against the term loans obtained from the State Government agencies.
5. He has pleaded that it not denied that what was collected under the head Sales Tax was in terms of the Sales Tax Act and the same was also credited to the State Governments. Hence, he has pleaded that the amount identified as sales tax in terms of Section 4 is to be allowed abatement. He has pleaded that there was no extra realisation as such from their customers and appellant did not retain any amount beyond the amount which was taken as ex-works price and approved by in the price list.
6. He has therefore pleaded that the abatement in terms of Section 4(4)(d)(ii) was allowable. In any case, he pleaded the longer period of limitation could not have been invoked in as much as the appellants were on record as to the realisation of the sales tax and they had filed necessary RT 12 returns in respect of the same and they had acted bona fidely in terms of the scheme formulated by the State Government. The appellants were under the bona fide impression that the abatement was allowable. He has therefore pleaded that there was no suppression with the intention to evade the payment of duty and the demand is barred by limitation.
7. The learned JDR for the department pleaded that the admitted position is that the appellants got the benefit of the sales tax after its realisation through the agencies of the State Government and since this amount ultimately was used for their benefit, this should be deemed to be an extra consideration for the sale of the goods and for that reason this element should be reckoned towards the assessable value in terms of Section 4. He further pleaded since the fact of the benefit flowing to the appellants was not revealed to the authorities, there was suppression of fact.
8. We have considered the pleas made by both the sides. We observe that the facts as have been brought on record clearly show that the appellants over and above the ex-works price realised the sales tax element payable in terms of the goods under the State Sales Tax Act from their customers and this element realised by them was remitted to the State authorities. By reason of the sale of the goods, there was no consideration flowing from the customers to them other than the amount which was realised in terms of the invoices which covered the ex-works price and the sales tax element. There is also no allegation, not even an indication that any extra consideration flowed to the appellants in respect of the sale of the goods from their buyers. For the purpose of acceptance of price for assessment purposes in terms of Section 4, the criterion to be satisfied is that the price should be such as is the one at which goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time of and place of removal when the buyer is not a related person and price is sole consideration. There is nothing to say in the impugned order, that so far as the transactions between the appellant and the buyers of the goods are concerned the price was not the sole consideration. once it is accepted that the amount realised as per the invoice was the sole consideration then that would form the basis for arriving at the assessable value. The assessable value therefore will have to be worked out taking into consideration the other parameters which are provided in terms of Section 4. In terms of Section 4(4)(d)(ii) various abatements for the purpose of arriving at the assessable value have been provided for. Sales tax is one such allowable abatement. The appellants have realised the sales tax from their customers and credited to the Government as required under the Sales Tax Act. This exercise done by them is like any other transaction under the Sales Tax Act. There is nothing to say that this element collected as sales tax could not be treated as sales tax as such. If that be so, the abatement in terms of Section 4(4)(d)(ii) will have to be allowed.
9. What, however, the learned lower authority has done is examined as to what happened to this sales tax which was remitted to the state authorities. We observe that the State has power to raise revenues in terms of power conferred under the Constitution and the collection of sales tax falls within the purview of the powers of the State Government. The tax collected by the State Government are spent for various purposes and activities carried out within the state. These amounts collected may be spent for providing infrastructure including that for the industry, subsidy to various sectors like agriculture, small scale industries or for other purposes. What the State Government does and the benefit which it confers and the subsidy it gives are the sovereign right of the State Government. Any benefits which are given out of the taxes collected may have the bearing on the cost of production of the goods. But the question to be answered is whether such benefits which are conferred by the State Government on an industrial unit and by reason of which the cost of the goods may get reduced can be taken cognisance by the Central Excise authorities. There is nothing in the Central Excise Laws to say that the subsidies given by the State Government can be taken into reckoning for the purpose of arriving at the assessable value. What the Central Excise law requires is to see mat what is the realisation for the sale of the goods and whether sale transaction satisfies the criterion laid down for the purpose of assessment, and if that be so, that price alone should be taken into consideration for the purpose of assessment of the goods.
10. In view of the above, we hold that the lower authority was in error in reckoning the subsidy which was given equivalent to the sales tax realised towards assessable value.
11. We, therefore, hold that the appellant's plea on merits has to be allowed. The learned lower authority's order is set aside and the appeal is allowed.